Balkrishna Industries Shares Backtrack 10% On Dismal Q4 Earnings, Weak Outlook

Shares of tyre-maker Balkrishna Industries tanked over 10% on May 26 as investors shun the stock following the company’s weak earnings show for the March quarter.

The tyre manufacturer’s net profit for the January-March period slipped 25% on year to Rs 362 crore, largely bogged down by a spike in input, finance and employee costs. On the other hand, revenue for the quarter rose 5% year-on-year to Rs 2,838 crore.

Meanwhile, high input costs also dragged the company’s EBITDA margin, which contracted 115 basis points on year to 24.78% in Q4. Europe continues to be the company’s largest market by volume, contributing 45.1% of total sales, followed by India at 28.6% and the Americas at 15.2%.

Looking ahead, the company aims to scale its production capacity to 4.25 lakh tonnes per annum, supported by ongoing capital expenditure and de-bottlenecking efforts. Its new off-road tyre facility at Bhuj, designed for an annual capacity of 35,000 tonnes, is expected to be operational by the end of FY26.

To fund that, the board has approved a Rs 3,500 crore capital expenditure plan over the next three years to expand operations at Bhuj. The investment will support new units for carbon black, power generation, commercial vehicle tyres, rubber tracks, and passenger car radial tyres.

Balkrishna Industries is also preparing for a phased entry into the premium passenger car radial and commercial vehicle radial tyre segments, with an initial focus on the domestic replacement market in both categories.

However, the strategic shift into new product segments has drawn scepticism from analysts. Nomura downgraded the stock to ‘neutral’ from the earlier ‘buy’ call while also reducing its price target by 18% to Rs 2,644, citing heightened risks from intense competition in the truck and car radial markets, which are dominated by established players.

Nomura also warned of potentially higher upfront investment requirements to build distribution and brand recognition, with scenario analysis indicating that such moves could compress EBITDA margins to 22–23% and reduce RoE by up to 200 basis points.

Echoing these concerns, Nuvama Institutional Equities downgraded the stock to a ‘hold’ and cut its price target by 13% to Rs 2,700. It noted that mass-market tyre firms in the TBR and PCR segments operate on thinner margins (sub-15%) and command lower valuation multiples, posing a structural challenge for Balkrishna’s diversification plans.